The FAO's Food Price Index – based on the prices of a basket of internationally-traded food commodities – averaged at 207.9 points in May 2014, down 1.2% from April and almost 3.2% from May last year. This price drop was generally attributed to improved production and supply.
“The Index had risen to a ten-month high of 213 points in March, but fell in April and May amid lower dairy, cereal and vegetable oil prices. Sugar prices went against the trend, making strong gains in May, while meat remained firm,” the FAO said in its monthly report.
Meanwhile, an accompanying report by the FAO on cereal supply and demand showed the outlook for the global cereal supply in 2014/15 had improved considerably since the previous monthly report.
Senior FAO economist Abdolreza Abbassian said: "We went into May with concerns over unfavourable weather conditions, especially in the US, and geopolitical tensions in the Black Sea region, but towards the second half of May, we began to see lower wheat prices following improved weather conditions and the continuation of regular shipping patterns from the Ukraine."
According to the report, the forecast for global cereal stocks by the end of 2015 crop season has been upped by around 10 million tonnes since May, reaching 576 million tonnes. With this update in mind, it said worldwide cereal stocks-to-use ratio could be set for a 10-year high.
The rise and fall
Dairy prices fell sharply by 5% during April. The FAO said this sector was undergoing “some adjustment” as production outlook improved after a period of “exceptionally high prices” in 2013 and early 2014.
Sugar went against the grain with a price increase of 3.7% from April, something the FAO put down to early forecasts of a possible production deficit for the 2014/15 season and El Niño weather concerns.
Vegetable oil prices were down by an average of 1.8% from April, spurred by lower quotations of palm, soy and rapeseed oils. Average meat prices remained practically the same.
Cereal drop fuelled by maize
The FAO said a 1.2% price drop in cereals in May was most likely down to the favourable growing conditions and therefore good supply forecasts for maize.
It said that wheat prices “amid fears of disruptions to trade flows from Ukraine” had, in part, contributed to the price increases seen earlier in the year. Global wheat production in 2014 was forecast at nearly 703 million tonnes, up slightly from the May forecast, though down from the same period in the previous year.
The organisation’s cereal report forecast total global cereal production – including rice - in 2014 at just under 2,480 million tonnes, about 1% up from May this year, but still down 1.4% from last year.